Question

Software Distributors reports net income of $65,000. Included in that number is depreciation expense of $15,000 and a loss on the sale of land of $6,000. A comparison of this year's and last year's balance sheets reveals a decrease in accounts receivable of $28,000, a decrease in inventory of $37,000, and an increase in accounts payable of $45,000.

Answer 1

cash generated from operating activities 196,000

Step-by-step explanation:

We have to detemrinate the cash generated from operating activities using indirect method:

net income 65,000

non-monetary adjustment

depreciation expense 15,000

loss on sale of land 6,000

adjusted income 86,000

changes in working capital*

A/R decrease 28,000

Inventory decrease 37,000

increase in A/P 45,000

net change 110,000

cash generated from operating activities 196,000

*decrease in assets represent were converted int cash

while increase of liabilities represent the delayment of cash outlay